The rupee appreciated 67 paise to 82.14 against the US dollar in early trade on Thursday as dollar retreated from its elevated levels.
At the interbank foreign exchange, the domestic unit opened at 82.15 against the dollar, then gained ground to quote at 82.14, registering a rise of 67 paise over its previous close.
In the previous session on Tuesday, the rupee appreciated by 7 paise to close at 82.81 against the dollar.
The forex market was closed on Wednesday on account of Diwali Balipratipada.
The rupee opened stronger after the dollar index fell to below 110 levels, said Anil Kumar Bhansali, Head of Treasury, Finrex Treasury Advisors.
"The probable reason for this fall is slower rate hikes from the US in November-22 despite inflation being higher," Bhansali said.
The dollar index, which gauges the greenback's strength against a basket of six currencies, rose 0.06 per cent to 109.76.
The rise in oil prices from $90 per barrel to $94 per barrel would cap the rise in the rupee as oil is a major import for the country. Oil companies and importers will use this opportunity to buy dollars at a cheaper rate, Bhansali said.
Brent crude futures, the global oil benchmark, advanced 0.26 per cent to $95.94 per barrel.
"The range for the day is expected to be 81.80 to 82.40 as most Asian currencies have also risen from their recent lows," Bhansali said.
In the domestic equity market, the 30-share BSE Sensex was trading 371.83 points or 0.62 per cent higher at 59,915.79. Similarly, the broader NSE Nifty rose 113.40 points or 0.64 per cent to 17,769.75.
Foreign Institutional Investors (FIIs) were net sellers in the capital markets as they offloaded shares worth Rs 247.01 crore on Tuesday, according to exchange data.